Pub Companies left with sour taste as MP's revolt on the age old tied premises...

Fri, 11/21/2014 - 15:48 -- jamesstuart

Pub company shares have dropped after MPs voted to end stiff rules that force their pub tenants to pay higher prices than non-tenants for their drinks.
Shares in the two biggest pub chain companies, Enterprise Inns and Punch Taverns, both fell steadily through the day to close down 17%.
The amendment would affect the 20,800 of Britain's 48,000 pubs that are subject to beer "ties".
Non-tied pubs often pay considerably lower prices for their beverages.
Tenants of "tied" pubs pay lower rents than non-tied pubs, but higher prices for their beer and other drinks.
Critics say this leaves the majority of publicans earning less than the minimum wage.
Campaign for Real Ale (CAMRA) research found a pub company may charge £150 for an 11 gallon keg of Fosters, for example, compared with a wholesale price of £84. It welcomes the change.
How much more do tied pubs pay?
Product Wholesale Price Pub Company Price Percentage difference
Fosters Keg (11 Gallons) £84.99 £150.22 77%
Heineken Keg (11 Gallons) £114.99 £177.98 55%
San Miguel Keg (11 Gallons) £106.99 £178.75 67%
Guinness (11 Gallons) £108.99 £162.46 49%
Courage Best Cask (9 Gallons) £69.99 £104.21 49%
Source: CAMRA, 2013

But the British Beer and Pub Association (BBPA) said the move was "hugely damaging" and spoiled a practice that had done well for 400 years.
A spokesman said that the tie model was the most popular model and allowed tenants and owners - pub companies and brewers - to share the risk.
The association said that the Government's own research found that 1,400 pubs would close and 7,000 jobs would be lost if the tie model was abandoned.
There are a further 7,500 pubs that are managed by pub companies and brewers, and almost 20,000 independents, according to the BBPA. The number of pubs has fallen by almost 13,000 since 2000.
Liberal Democrat MP Greg Mulholland, who proposed the reform, said it would "simply bring back market forces into a sector that frankly has become grotesquely anti-competitive".
His "market rent only" plans would come in gradually over five years if they pass through parliament to become law.
The government was defeated by Tuesday night's 284 to 259 vote in what was believed to be the first defeat on one of its own bills since the 2010 election.
Continue reading the main story

Enterprise Inns
price change %
100.00 p -
-2.60 -

Enterprise Inns has about 5,000 pubs and is Britain's biggest owner. Simon Townsend, its chief executive, said the change would lead to widespread pub closures and job losses, according to independent research commissioned by the government.
"This amendment is a disproportionate response which proposes fundamental change that is wholly contrary to the findings of the consultation, from which the Bill was drawn up," he said. "We continue to believe the tie offers the best operating model for the vast majority of our publicans."
Punch Taverns, which has about 4,000 pubs, said that the amendment to the Small Business, Enterprise and Employment Bill would have "significant adverse consequences for Britain's community pubs" if it became law.
The company said that the amendment would result in an "unworkable two-tier economic market" and would be contrary to existing legal contracts and property rights.
'Historic day'
However, the Federation of Small Businesses said it was "a historic day for tied publicans" and would lead to a more open and competitive marketplace.
Tim Page, chief executive of CAMRA, said that the vote would help secure the future of pubs. "The large pub companies will no longer be able to charge their tenants prices up to 60p a pint higher than open market prices," he added.
Karl Burns, a Panmure Gordon analyst, said Enterprise Inns' shares had been hit hardest because its profits would be the worst affected if the measure became law.
However, he added: "There's still a lot of uncertainty so it's early days. This is likely to be a long, drawn-out process."
Geof Collyer, a Deutsche Bank analyst, said the although the measure would have significant consequences for the industry, it was "not impossible" that the pub companies would "all be much better off" at the end of the five-year process.
Shares in Spirit Pub Company, which is being taken over by Greene King, were down 6.5%, and Greene King's by 4.5%, but Mr Burns said the deal would not be derailed by the unexpected amendment.